Anna Blajer-Gołębiewska, University of Gdansk,
Sopot, Poland,
E-mail: a.blajer@ug.edu.pl Maciej Kos,
College of Computer & Information Science,
& Bouve College of Health
INVESTORS ARE MORE SENSITIVE TO INFORMATION ABOUT FINANCIAL RATHER THAN
ETHICAL REPUTATION OF A COMPANY: EVIDENCE FROM AN EXPERIMENTAL STUDY
Sciences,
Northeastern University, Boston, USA,
E-mail: mkos@ccs.neu.edu
ABSTRACT. The aim of the research was to identify the nature of the relationship between corporate reputation and individuals’ investment decisions. We focused on three reputational factors that influence such decisions: value of stock market analysts’ recommendation (either neutral or positive), reputation value (either positive or negative), and reputation domain (either ethical or financial).
We tested two hypotheses in an online experiment and we have confirmed that investors are more sensitive to firm’s financial rather than to its ethical reputation. However, we could not confirm that a reputation damage has a stronger impact on changes in the planned investment’s value than an improvement in company’s reputation.
Received: July, 2015
1st Revision: October, 2015 Accepted: December, 2015
DOI: 10.14254/2071- 789X.2016/9-1/1
JEL Classification : M14,
G11, C91 Keywords : Corporate Reputation, Investment Decisions, Experiments.
Introduction
Company‟s reputation is a function of socially shared impressions, collective judgements based on various factors: financial and economic, ethical, social, technological and other environmental impacts (Fombrun, Van Riel, 1997; Scott, Walsham, 2005, Barnett, Jermier and Lafferty, 2006). A good reputation is a strategic asset of a company, as it is said to have an ability to create wealth (Fombrun, 1996).
There is a wide array of research on companies‟ reputation and its impact on investors‟ decisions. However, the results are inconsistent. Economists found that the relationship between company‟s reputation and the return on its shares is significant (Brammer, Brooks, Pavelin, 2006) but it does not always occur (Blajer-Gołębiewska, 2014a).
As the results of various studies in this area are inconsistent, the impact of corporate reputation on investors‟ decisions in the stock exchange still needs to be carefully examined.
As a result, our aim was to identify the nature of the relationship between corporate reputation and individuals‟ investment decisions. We focused on three reputational factors that influence investment decisions: stock market analysts‟ recommendation (either neutral or
Blajer-Gołębiewska, A., Kos, M. (2016), Investors are more Sensitive to Information about Financial Rather than Ethical Reputation of a Company:
Evidence from an Experimental Study, Economics and Sociology, Vol. 9, No 1, pp. 11-22. DOI: 10.14254/2071-789X.2016/9-1/1